DOL Fiduciary Rule Resources

Due to the high standards to which AICPA members are already held, the new Due to the high standards to which AICPA members are already held, the new rule should have minimal impact on members who provide personal financial planning advice and adhere to the SSPFPS and Code of Professional Conduct. To provide further information, clarification and guidance on the proposed rule, experts Ron Rhoades and Blaine Aiken have prepared resources for PFP Section members, inclusive of CPA/PFS credential holders, that explore the many effects of the U.S. Department of Labor’s Fiduciary Rule on advisors delivering advice on retirement assets. For the latest news and developments related to this rule, be sure to check the Personal Financial Planning Section’s Legislative and Regulatory News page. 
 

News and Overview: The DOL Fiduciary Rule

A portion of the U.S. Department of Labor Fiduciary Rule took effect on June 9, 2017. This mandates that advisers delivering investment advice on retirement assets adhere only to the Impartial Conduct Standards requirements (including the “best interest” standard) during the transition period which has been extended through July 1, 2019. At that time, the full impact of the rule, including the BIC Exemption and the Principal Transactions Exemption requirement, is currently scheduled to take effect. During the transition period, firms and individuals are given time to prepare for certain new disclosure requirements. Click here to access the U.S. Department of Labor site which details regulation, exemptions and specific information on the transition period for implementation.

Use this resource to determine what impact this rule will have on your practice.  Understand the essence of the rule by understanding how to answer these key questions:

  • Does the rule apply to me?
  • What is the core premise of the rule?
  • What does the rule cover?
  • What is the difference between fiduciary advice and non-fiduciary education?

Dive deeper into the rule's key provisions and exemptions, and best practices for adherence to its provisions in this white paper. A few of the provisions of interest include:

  • Generally, the DOL exempts accountants who have historically not been treated as ERISA fiduciaries for clients. Only when accountants make recommendations on retirement account (both plan and IRA) rollovers, transfers and distributions from an account are these professionals considered to be under the fiduciary advisor umbrella. The DOL considers these actions to be outside of the normal role of an accountant, defining these engagements as fiduciary investment advice. However, there are activities identified by DOL as not constituting investment advice, such as the provision of educational and informational materials.  (pgs. 20-22)
  • Fee-only advisers were not the target of the DOL rulemaking efforts. They will generally be able to use the Best Interest Contract Exemption when making a recommendation to a plan participant to take a full or partial distribution from a plan to invest in something that will generate a fee for the adviser, even if based on a fixed percentage of assets under management.  (pgs. 23-25)
  • The rule only applies to securities and investment property relating to designated retirement accounts, including Individual Retirement Accounts.  It is in the hands of the Securities and Exchange Commission to elevate brokers to the fiduciary standard of care, when providing investment advice to retail investors, to ensure that all investment advice is covered under this high standard.  (pgs. 15 & 16)

The fiduciary guide, Prudent Practices for Investment Advisors, created by fi360 and technically reviewed by the AICPA’s fiduciary task force, led by Clark M. Blackman II, CPA/PFS, may be helpful in determining specifics required to meet the fiduciary standard of care.

Background

On April 8, 2016, the Department replaced the 1975 regulation with a new Fiduciary Rule. The new Rule had an original applicability date of April 10, 2017, but the department extended the effective date by 60 days making only the Impartial Conduct Standards portion of the rule effective on June 9, 2017. It was in this extension that the applicability date changed for the BIC Exemption and the Principal Transactions Exemption and requirement for investment advice fiduciaries relying on these exemptions to adhere only to the Impartial Conduct Standards as conditions of those exemptions during a transition period from June 9, 2017 through January 1, 2018. On August 28, 2017, the OMB Approved the DOL’s proposal to delay the transition period the additional 18 months, but the delay must now be finalized by the labor department. On October 12, the House Financial Services Committee passed a bill, H.R. 3857, the Protecting Advice for Small Savers Act of 2017 (PASS), which would entirely repeal the rule. 

Formal language suggesting the delay was submitted to the OMB by the Labor Department on November 1, 2017 and was filed on November 27, 2017.  The text was reported in the Federal Register on 11/29/2017.  Many have suggested that the additional delay in the applicability date is needed for the Department and Secretary of Labor Acosta to work in unison with the Securities and Exchange Commission (SEC) under Chairman Clayton.  Separately, on October 12, the House Financial Services Committee passed a bill, H.R. 3857, the Protecting Advice for Small Savers Act of 2017 (PASS), which would entirely repeal the rule.

Podcast Series: Impact of the DOL Fiduciary Rule

In this podcast series, Ron Rhoades discusses the impact of the DOL fiduciary rule, including:  

  • Part 1: General overview of the DOL rule, implementation date, and impact of the rule of different segments of the financial services industry, including how DOL formalizes what professional associations have done (for example, the AICPA’s promulgation of the Statement on Standards in Personal Financial Planning Services)
  • Part 2: The specific impacts on CPAs; how brokerage firms, insurance companies, and asset managers are responding, and grandfathering provisions of the rule.
  • Part 3: Operating under BICE – is it workable? What are the Impartial Conduct Standards, and what challenges exist in complying with them?
  • Part 4: Fee-only advisers: the rules affect you, as well. These new requirements include several items relating to IRA Rollovers from QRPs – it’s not an “automatic” decision any more.
  • Part 5: Educational advice exemption, proprietary mutual funds, other proprietary products, and principal trading, and due diligence – as it relates to both investment strategy and investment products.